UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant |_|
Filed by a Party other than the Registrant |X|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
IRON MOUNTAIN INCORPORATED
(Name of registrant as specified in its charter)
SULLIVAN & WORCESTER LLP
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggegate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
purusant to Exchange Act Rule 0-11 (Set forth the amount on which
the filinhg fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offseting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
IRON MOUNTAIN INCORPORATED
745 Atlantic Avenue
Boston, Massachusetts 02111
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 29, 1997
To the Stockholders of
IRON MOUNTAIN INCORPORATED:
The 1997 Annual Meeting of Stockholders of Iron Mountain Incorporated,
a Delaware corporation (the "Company"), will be held at the offices of Sullivan
& Worcester LLP, 23rd Floor, One Post Office Square, Boston, Massachusetts, on
Thursday, May 29, 1997 at 10:00 a.m., local time, for the following purposes:
1. To elect two Class B Directors for a three-year term or until
their successors are elected and qualified.
2. To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation to increase the number of
authorized shares of the Company's Common Stock, par value
$.01 per share, from 13,000,000 to 20,000,000.
3. To approve an amendment to the Company's 1995 Stock Incentive
Plan to increase the number of shares of Common Stock
authorized for issuance thereunder from 1,000,000 to
1,400,000.
4. To approve an amendment to the Company's 1995 Stock Incentive
Plan to provide for accelerated vesting and conversion of
options and stock appreciation rights in the event of certain
mergers or consolidations.
5. To ratify the selection by the Board of Directors of Arthur
Andersen LLP as the Company's independent public accountants
for the year ending December 31, 1997.
6. To transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
Stockholders of record at the close of business on March 31, 1997 are
entitled to notice of, and to vote at, the meeting or any adjournment or
postponement thereof.
All stockholders are cordially invited to attend the meeting.
By order of the Board of Directors
JAS. MURRAY HOWE, Secretary
Boston, Massachusetts
April 30, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY MAIL THE PROXY CARD IN THE
ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE
MEETING. NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED WITHIN THE
UNITED STATES.
<PAGE>
IRON MOUNTAIN INCORPORATED
745 Atlantic Avenue
Boston, Massachusetts 02111
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To be held on May 29, 1997
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Iron Mountain Incorporated, a Delaware
corporation ("Iron Mountain" or the "Company"), for use at the Annual Meeting of
Stockholders to be held on Thursday, May 29, 1997 (the "Annual Meeting") or at
any adjournment or postponement thereof.
The Company's Annual Report to Stockholders for the year ended December
31, 1996 is being mailed to stockholders with the mailing of this Proxy
Statement on or about April 30, 1997.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's Directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews. Brokers, banks, custodians and other
fiduciaries will be requested to forward proxy soliciting material to the
beneficial owners of stock held of record by such fiduciaries, and the Company
will reimburse them for their reasonable out-of-pocket expenses incurred in
connection with the distribution of such proxy materials.
Revocability of Proxies
Any stockholder giving a proxy in the enclosed form has the power to
revoke it at any time before it is exercised by delivering to the Secretary of
the Company at its principal executive office located at 745 Atlantic Avenue,
Boston, Massachusetts 02111, a written notice of revocation or another duly
executed proxy bearing a later date. A stockholder may also revoke his or her
proxy by attending the Annual Meeting and voting in person.
Record Date, Voting and Share Ownership
The Company's Common Stock, par value $.01 per share (the "Common
Stock"), is the only class of voting securities outstanding and entitled to vote
at the Annual Meeting. On March 31, 1997 (the "Record Date"), the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting, 9,686,732 shares of Common Stock were outstanding and entitled
to vote. Each share is entitled to one vote.
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the shares of Common Stock issued and outstanding on
the Record Date (4,843,367 shares)
<PAGE>
will constitute a quorum for the transaction of business at the Annual Meeting.
A proxy in the enclosed form, if received in time for voting and not revoked,
will be voted at the Annual Meeting in accordance with the instructions
contained therein. Where a choice is not so specified, the shares represented by
the proxy will be voted "for" the election of the nominees for Director listed
herein and in favor of the other matters set forth in the Notice of Annual
Meeting accompanying this Proxy Statement.
Shares represented by a properly signed and returned proxy will be
treated as present at the Annual Meeting for purposes of determining a quorum,
without regard to whether the proxy is marked as casting a vote or abstaining.
Shares represented by "broker non-votes" will also be treated as present for
purposes of determining a quorum, although such shares may not be voted on any
matter for which the record holder of such shares lacks authority to act.
Abstentions and broker non-votes are considered present for purposes of
determining a quorum. Abstentions and broker non-votes do not affect the
election of the Directors, the proposed amendmenst to the Company's 1995 Stock
Incentive Plan or the ratification of the accountants; however, with respect to
Item 2, the proposed amendment to the Company's Amended and Restated Certificate
of Incorporation, they will have the same effect as a vote against the proposed
amendment. Broker non-votes are proxies with respect to shares held in record
name by brokers or nominees, as to which (i) instructions have not been received
from the beneficial owners or persons entitled to vote, (ii) the broker or
nominee does not have discretionary voting power under applicable national
securities exchange rules or the instrument under which it serves in such
capacity, and (iii) the holder has indicated on the proxy card or otherwise
notified the Company that it does not have authority to vote such shares on that
matter.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of Common Stock by (i) each stockholder
known by the Company to be the beneficial owner of more than five percent of the
Common Stock, (ii) each Director, including each nominee for Director, (iii) the
Chief Executive Officer and the other four most highly compensated executive
officers (the "Named Executive Officers") who received compensation in excess of
$100,000 in 1996 and (iv) all executive officers and Directors of the Company as
a group. Such information is presented as of April 1, 1997.
Amount of Beneficial Ownership(1)
Name Shares Percent Owned
Directors and Executive Officers
C. Richard Reese(2)........................ 1,127,503 11.6%
David S. Wendell(3)........................ 99,822 1.0%
Eugene B. Doggett(4)....................... 169,745 1.8%
Robert P. Swift(5)......................... 20,895 *
Kenneth F. Radtke, Jr.(6).................. 1,180 *
Constantin R. Boden(7)..................... 20,510 *
Arthur D. Little(8)........................ 50,260 *
Vincent J. Ryan(9)......................... 3,445,750 35.6%
2
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All Directors and executive
officers as a group (9 persons)(10)..... 4,243,909 43.8%
Five Percent Stockholders
Schooner Capital Corporation(11)........... 1,909,384 19.7%
William Blair & Company, L.L.C.(12)........ 811,499 8.4%
John Hancock Advisers, Inc.(13)............ 500,000 5.2%
- ---------------------
* Less than 1%
(1) Except as otherwise indicated, the persons named in the table above
have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them.
(2) Mr. Reese is a Director and Chairman of the Board and Chief Executive
Officer of the Company. Includes 13,450 shares of Common Stock held by
trusts for the benefit of Mr. Reese's children, as to which Mr. Reese
disclaims beneficial ownership. Also includes 668,166 shares of Common
Stock as to which Mr. Reese shares beneficial ownership with Schooner
Capital Corporation ("Schooner") as a result of a 1988 deferred
compensation arrangement, as amended, between Schooner and Mr. Reese
relating to Mr. Reese's former services as President of Schooner.
Pursuant to such arrangement, upon the earlier to occur of (i)
Schooner's sale or exchange of substantially all of the shares of
Common Stock held by Schooner or (ii) the cessation of Mr. Reese's
employment with Iron Mountain, Schooner is required to transfer such
shares of Common Stock to Mr. Reese or remit to Mr. Reese cash in an
amount equal to the then current fair market value of such shares of
Common Stock. Schooner has agreed to vote the shares of Common Stock
subject to such arrangement at the direction of Mr. Reese. Mr. Reese's
address is c/o Iron Mountain Incorporated, 745 Atlantic Avenue, Boston,
Massachusetts 02111.
(3) Mr. Wendell is a Director and President and Chief Operating Officer of
the Company. Includes 95,967 shares that Mr. Wendell has the right to
acquire pursuant to currently exercisable options. See "Executive
Compensation." Mr. Wendell's address is c/o Iron Mountain Incorporated,
745 Atlantic Avenue, Boston, Massachusetts 02111.
(4) Mr. Doggett is a Director and Executive Vice President and Chief
Financial Officer of the Company. Mr. Doggett has announced his
intention to retire, effective May 29, 1997, as Chief Financial Officer
of the Company. Includes 29,550 shares of Common Stock as to which Mr.
Doggett shares beneficial ownership with Schooner as a result of a 1988
deferred compensation arrangement, as amended, between Schooner and Mr.
Doggett relating to Mr. Doggett's former services as Chief Financial
Officer of Schooner. Pursuant to such arrangement, upon the earlier to
occur of (i) Schooner's sale of substantially all of the shares of
Common Stock held by Schooner or (ii) the cessation of Mr. Doggett's
employment with Iron Mountain, Schooner is required to transfer such
shares of Common Stock to Mr. Doggett or remit to Mr. Doggett cash in
an amount equal to the then current fair market value of such shares of
Common Stock. Schooner has agreed to vote the shares of Common Stock
subject to such arrangement at the direction of Mr. Doggett. Mr.
Doggett's address is c/o Iron Mountain Incorporated, 745 Atlantic
Avenue, Boston, Massachusetts 02111.
(5) Mr. Swift is an Executive Vice President of the Company. Consists of
shares that Mr. Swift has the right to acquire pursuant to currently
exercisable options. See "Executive Compensation." Mr. Swift's address
is c/o Iron Mountain Incorporated, 1340 East 6th Street, Los Angeles,
California 90021.
(6) Mr. Radtke is an Executive Vice President of the Company. Consists of
shares that Mr. Radtke has the right to acquire pursuant to currently
exercisable options. See "Executive Compensation." Mr. Radtke's address
is c/o Iron Mountain Incorporated, 745 Atlantic Avenue, Boston,
Massachusetts 02111.
(7) Mr. Boden is a Director of the Company. Mr. Boden's address is c/o
Boston Capital Ventures, 45 School Street, Boston, Massachusetts 02110.
(8) Mr. Little is a Director of the Company. Includes 49,365 shares held by
The Little Family Trust as to which Mr. Little disclaims beneficial
ownership. Mr. Little's address is c/o The Little Investment Company,
33 Broad Street, Boston, Massachusetts 02109.
3
<PAGE>
(9) Mr. Ryan is a Director of the Company. Mr. Ryan holds 1,536,366 shares
of Common Stock. The remaining shares of Common Stock listed as being
beneficially owned by Mr. Ryan are held by Schooner, as to which Mr.
Ryan has sole voting power and investment power as the Chairman of the
Board and principal stockholder. Mr. Ryan's address is c/o Schooner
Capital Corporation, 745 Atlantic Avenue, Boston, Massachusetts 02111.
See footnote (11) regarding shares held by Schooner.
(10) Includes 124,002 shares that Directors and executive officers have the
right to acquire pursuant to currently exercisable options.
(11) Mr. Ryan is the Chairman of the Board and the principal stockholder of
Schooner and accordingly has sole voting and investment power with
respect to the shares of Common Stock held by Schooner. Includes
668,166 shares of Common Stock as to which Schooner shares beneficial
ownership with Mr. Reese as described in footnote (2). Also includes
29,550 shares of Common Stock as to which Schooner shares beneficial
ownership with Mr. Doggett as described in footnote (4). Schooner has
agreed to vote the shares of Common Stock subject to such arrangements
at the direction of Mr. Reese or Mr. Doggett, as the case may be.
(12) The address of William Blair Company, L.L.C. is 222 West Adams Street,
Chicago, Illinois 60606.
(13) The address of John Hancock Advisers, Inc. is 101 Huntington Avenue,
Boston, Massachusetts 02199.
4
<PAGE>
ITEM 1
ELECTION OF DIRECTORS
The Board of Directors currently consists of six Directors. There are
three classes of Directors who serve for a three-year term and are elected on a
staggered basis, one class of two Directors standing for election each year. The
term of the Class B Directors, C. Richard Reese and Arthur D. Little, will
expire at the Annual Meeting, the term of the Class C Directors, Eugene B.
Doggett and Constantin R. Boden, will expire at the 1998 Annual Meeting of
Stockholders, and the term of the Class A Directors, David S. Wendell and
Vincent J. Ryan, will expire at the 1999 Annual Meeting of Stockholders. In
accordance with the terms of the Agreement and Plan of Merger, dated as of
February 19, 1997, as amended (the "Merger Agreement"), among the Company, IM-1
Acquisition Corp., a wholly owned subsidiary of the Company ("IM-1"), and
Safesite Records Management Corporation ("Safesite"), upon the consummation of
the merger of Safesite with IM-1 (the "Merger"), the number of Directors will be
increased to seven and B. Thomas Golisano, the Chairman of the Board of
Directors of Safesite, will be appointed to serve as a Class A Director of the
Company. The Merger is subject to certain conditions, and there can be no
assurance that it will be consummated. Directors of each class hold office until
the third annual meeting of the stockholders of the Company following their
election or until their successors are elected and qualified.
At the Annual Meeting, the two Class B Directors are to be elected to
serve until the Company's 2000 Annual Meeting of Stockholders, or until their
successors are elected and qualified. The Board of Directors has selected as
nominees the current Class B Directors of the Company, C. Richard Reese and
Arthur D. Little. Both have agreed to serve if elected, and management has no
reason to believe that either nominee will be unavailable to serve. There are no
arrangements or understandings between any nominee and any other person pursuant
to which such nominee was nominated.
Executive officers of the Company were last elected on June 14, 1996,
with the exceptions of Kenneth F. Radtke, Jr. and Robert G. Miller, who were
elected Executive Vice Presidents in late June 1996 and December 1996,
respectively. At a meeting to be held immediately following the Annual Meeting,
the Board of Directors will reelect the current executive officers of the
Company, other than Mr. Doggett, who has announced his intention to retire as
Chief Financial Officer of the Company effective May 29, 1997. The Board of
Directors has proposed to elect John F. Kenny, Jr. currently the Company's Vice
President of Corporate Development, to succeed Mr. Doggett as Chief Financial
Officer. Each executive officer serves a term of one year or until his or her
successor is elected and qualified. Except for T. Anthony Ryan, the Company's
Vice President, Real Estate, and Vincent J. Ryan, a Class A Director, who are
brothers, there are no family relationships between or among any officers or
Directors of the Company.
Required Vote
The affirmative vote of holders of a plurality of the shares cast at
the Annual Meeting is required to elect the Class B Directors.
5
<PAGE>
The Board of Directors recommends that the stockholders vote FOR the
election of each of the nominees listed below to serve as Class B Directors of
the Company until the 2000 Annual Meeting of Stockholders, or until their
successors are elected and qualified.
Set forth below are the name and age of each Class B Director, his
principal occupation and business experience during the past five years and the
names of certain other companies of which he served as a Director as of April 1,
1997.
<TABLE>
<CAPTION>
Principal Occupations and Business Experience
Nominee During the Past 5 Years
- --------------------------- ----------------------------------------------------------------------------------------
<S> <C>
C. Richard Reese Mr. Reese is a Class B Director and the Chairman of the Board of Directors of the
Age 51 Company, a position he has held since November 1995, and Chief Executive Officer,
a position he has held since December 1981. Prior to November 1995, Mr. Reese
was the President of the Company, a position he had held since 1981. Mr. Reese is
also a Director of Schooner. Prior to joining the Company, he lectured at Harvard
Business School in "Entrepreneurship" and provided consulting services to small and
medium-sized emerging enterprises. Mr. Reese has also served as president and a
Director of PRISM International, a trade group with approximately 525 members
(formerly known as the Association of Commercial Records Centers). He holds a
Master of Business Administration degree from Harvard Business School.
Arthur D. Little Mr. Little, a Class B Director of the Company, has been a Director since November
Age 53 1995. Mr. Little is a principal of The Little Investment Company, which he founded
in 1992. Prior to that, he was Managing Director of and also a partner in Narragansett
Capital, Inc., a private investment firm. He holds a Bachelor of Arts degree in
history from Stanford University.
</TABLE>
Set forth below are the name and age of each other Director and
executive officer (including Mr. Golisano, who will become a Class A Director of
the Company if the Merger is consummated, and Mr. Kenny, who will become Chief
Financial Officer of the Company on May 29, 1997, following Mr. Doggett's
retirement from that position), his principal occupation and business experience
during the past five years and the names of certain other companies of which he
served as a Director as of April 1, 1997.
<TABLE>
<CAPTION>
Principal Occupations and Business Experience
Name During the Past 5 Years
- --------------------------- ----------------------------------------------------------------------------------------
<S> <C>
David S. Wendell Mr. Wendell is a Class A Director and the President and Chief Operating Office of
Age 43 the Company, a position he has held since November 1995. After practicing law with
Brown & Wood, Mr. Wendell joined the Company in 1984, where he has served in a
variety of positions. Prior to November 1995, he was the Executive Vice President,
Atlantic Area, and prior to 1991, he was Vice President, New England Region.
He holds a Master of Business Administration degree from Harvard Business
School and a Juris Doctor degree from the University of Virginia.
Vincent J. Ryan Mr. Ryan is a Class A Director of the Company and the Chairman of the Executive
Age 61 Committee. Mr. Ryan is the founder of Schooner and has served as Chairman and
Chief Executive Officer of Schooner since 1971. Prior to November 1995, Mr. Ryan
served as Chairman of the Board of Directors of the Company. He holds a Bachelor
of Arts degree in English from Boston University.
6
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<CAPTION>
Principal Occupations and Business Experience
Name During the Past 5 Years
- --------------------------- ----------------------------------------------------------------------------------------
<S> <C>
Eugene B. Doggett Mr. Doggett is a Class C Director and is also the Executive Vice President and Chief
Age 60 Financial Officer of the Company, positions he has held since 1987. Mr. Doggett has
announced his intention to retire effective May 29, 1997 as Chief Financial Officer
of the Company but will continue to serve as Director and as Executive Vice President,
focusing on strategic issues and special projects. Mr. Doggett is also a Director of
Schooner. Prior to joining the Company, he had extensive experience in commercial
and investment banking, as well as financial and general management experience at
senior levels. He holds a Master of Business Administration degree from Harvard Business
School.
Constantin R. Boden Mr. Boden, a Class C Director of the Company, has been a Director since December
Age 60 1990. Mr. Boden is on the advisory board of Boston Capital Ventures, a risk capital
concern. For 33 years, until January 1995, Mr. Boden was employed by Bank of
Boston, most recently as Executive Vice President, International Banking. He holds
a Master of Business Administration degree from Harvard Business School.
Robert G. Miller Mr. Miller is an Executive Vice President of the Company, a position that he has held
Age 40 since December 1996. Mr. Miller joined the Company in 1988 and held the positions
of district manager from 1988 through 1991 and regional vice president from 1991
through 1996. Prior to 1988, Mr. Miller was employed as a district manager at
Bell & Howell Records Management Company.
Kenneth F. Radtke, Jr. Mr. Radtke is an Executive Vice President of the Company, a position that he has
Age 51 held since June 1996. Prior to June 1996, Mr. Radtke was the Company's Northeast
Regional Vice President and prior to 1995 he was Sales Manager, New York Region.
Mr. Radtke has worked in the records and information industry since 1988 as
President and Chief Executive Officer, Dataport Company, Inc. and Senior Vice
President, Arcus, Inc. He holds a graduate degree from the University of Wisconsin,
Graduate School of Banking.
Robert P. Swift Mr. Swift is an Executive Vice President of the Company, a position he has held since
Age 55 November 1995. Prior to November 1995, Mr. Swift was the Executive Vice President,
Western Area, of the Company, and prior to 1988, Mr. Swift was employed in various
positions at Bell & Howell Records Management Company.
John F. Kenny, Jr. Mr. Kenny will become the Chief Financial Officer of the Company upon the
Age 39 retirement of Mr. Doggett from that position on May 29, 1997. Mr. Kenny is
currently Vice President of Corporate Development, with primary responsibility
for implementing the Company's acquisition strategy. Mr. Kenny joined the
Company in 1991, and had operating responsibility as Regional Vice President
for New England and later for Northeast operations before assuming his role as
Vice President of Corporate Development in 1995. Prior to 1991, he was a Vice
President of CS First Boston Merchant Bank, New York, with responsibility
for risk management investments. He holds a Master of Business Administration
degree from Harvard Business School.
7
<PAGE>
<CAPTION>
Principal Occupations and Business Experience
Name During the Past 5 Years
- --------------------------- ----------------------------------------------------------------------------------------
<S> <C>
B. Thomas Golisano Mr. Golisano will be appointed to serve as a Class A Director of the Company
Age 55 following the consummation of the Merger. Mr. Golisano is a Director and Chairman
of the Board of Safesite. He founded Paychex, Inc., a publicly held national payroll
service company, in 1971 and has served for more than five years as its Chairman,
President and Chief Executive Officer. Mr. Golisano serves on the Board of Trustees
of Rochester Institute of Technology and on the boards of several privately held
companies. He has also served on the boards of numerous non-profit organizations
and is founder of the B. Thomas Golisano Foundation.
</TABLE>
Board and Committee Meetings
During the fiscal year ended December 31, 1996, the Board of Directors
held four regular quarterly meetings and two special meetings held by telephone.
Each incumbent Director who was then in office (other than Mr. Boden, who was
unable to attend one regular meeting when it was rescheduled and was also
unavailable for the telephone meetings) attended at least 75% of the aggregate
number of meetings of the Board of Directors and all committees thereof on which
such Director served. The Board of Directors has a standing Audit Committee,
Compensation Committee and Executive Committee, and a Stock Incentive Plan
Subcommittee of the Compensation Committee (the "Option Plan Subcommittee"). The
Compensation Committee, Option Plan Subcommittee and Executive Committee were
formally established by the Board of Directors in November 1995, although the
Executive Committee only came into existence in January 1996, upon completion of
the initial public offering of the Company's Common Stock. The Company does not
have a nominating committee. During the fiscal year ended December 31, 1996, the
Audit Committee held two meetings, the Option Plan Subcommittee held two
meetings, the Compensation Committee held two meetings and the Executive
Committee held no formal meetings.
The Audit Committee consists of Messrs. Boden (Chairman) and Little.
The Audit Committee consults with the Company's independent public accountants
regarding the plan for the Company's annual audit, reviews with the public
accountants their audit report and related management letter, reviews the
performance of the independent public accountants and their fees, reviews the
Company's internal accounting control policies and procedures, and considers and
recommends the selection of the Company's independent public accountants.
The Compensation Committee consists of Messrs. Little (Chairman), Boden
and Ryan. The Compensation Committee provides recommendations to the Board
regarding compensation policies and programs of the Company and is also
responsible for establishing and modifying the compensation for all executive
officers of the Company.
The Option Plan Subcommittee consists of Messrs. Little (Chairman) and
Boden, both of whom are "outside" or "non-employee" directors within the meaning
of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
and Rule 16b-3 under Section 16 of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), respectively. The Option Plan Subcommittee
administers the Iron Mountain Incorporated 1995 Stock Incentive Plan (the "Stock
Incentive Plan"), including the grant of stock options thereunder to all
8
<PAGE>
employees, including executive officers and recommends the adoption of and any
amendments to all stock incentive plans.
The Executive Committee consists of Messrs. Ryan (Chairman), Reese and
Doggett. Between meetings of the Board of Directors, the Executive Committee
exercises all the powers of the Board of Directors in the management and
direction of the business and affairs of the Company to the extent not otherwise
prohibited by law, the Board of Directors or the Company's Bylaws or Amended and
Restated Certificate of Incorporation.
Director Compensation
Directors who are employees of Iron Mountain do not receive additional
compensation for serving as Directors. Each Director who is not an employee of
Iron Mountain (each an "Eligible Director") receives an annual retainer fee of
$10,000 as compensation for his or her services as a member of the Board of
Directors and is also paid $2,500 per quarter (to a maximum of $10,000 per year)
for attendance at meetings (the "Director's Compensation"). All Directors are
reimbursed for out-of-pocket expenses incurred in attending meetings of the
Board of Directors or committees thereof, and for other expenses incurred in
their capacities as Directors. Pursuant to the Iron Mountain Incorporated 1995
Stock Plan for Non-Employee Directors (the "Directors Plan"), Eligible Directors
may elect to receive all or a portion of their Director's Compensation in the
form of Common Stock. An Eligible Director electing to receive Common Stock
under the Directors Plan will, as an incentive, receive in lieu of cash an
amount of Common Stock equivalent to 110% of the Director Compensation otherwise
due to be paid in cash. The Company has reserved 15,000 shares of Common Stock
for issuance under the Directors Plan. The Board has voted to terminate the
Directors Plan, effective June 30, 1997. Thereafter, Directors may be granted
options, either in lieu of or in addition to the Director's Compensation, under
the Stock Incentive Plan.
The Company paid a total of $61,250 in Directors fees in respect of
service for 1996. Pursuant to their elections, 764 and 895 shares of Common
Stock were received by Messrs. Boden and Little, respectively under the
Directors Plan in payment of such fees. Mr. Ryan received compensation of
$20,000 in cash.
9
<PAGE>
EXECUTIVE COMPENSATION
The following table provides certain information concerning
compensation earned by the Chief Executive Officer and the Named Executive
Officers for the years ended December 31, 1994, 1995 and 1996.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long-Term Compensation
----------------------- ---------------------------------------
Number of Shares
Name and Underlying All Other
Principal Position Year Salary Bonus Options Compensation (1)
------------------ ------ -------- ------- --------- ----------------
<S> <C> <C> <C> <C> <C>
C. Richard Reese.......................... 1996 $268,958 $165,000 0 $2,250
Chairman of the Board and 1995 $261,765 $200,000 0 $1,790
Chief Executive Officer 1994 $255,400 $125,000 0 $1,623
David S. Wendell.......................... 1996 $203,550 $125,000 40,000 $2,250
President and Chief Operating Officer 1995 $136,627 $ 62,731 35,469 $1,573
1994 $129,800 $ 50,000 0 $1,352
Eugene B. Doggett.......................... 1996 $194,639 $100,000 0 $2,250
Executive Vice President and Chief 1995 $192,274 $165,000 0 $1,790
Financial Officer 1994 $187,500 $ 93,750 0 $1,623
Robert P. Swift............................ 1996 $133,600 $ 50,800 15,000 $1,905
Executive Vice President 1995 $131,119 $ 24,397 8,096 $1,243
1994 $126,600 $ 16,740 0 $ 865
Kenneth F. Radtke, Jr...................... 1996 $119,800 $ 33,759 20,000 $1,350
Executive Vice President
- -------------
<FN>
(1) Reflects the Company's matching contribution to the Iron Mountain Profit Sharing Retirement Plan for each individual.
Amounts shown for 1996 are estimated maximum contributions; the actual contributions have not yet been calculated.
</FN>
</TABLE>
The following table sets forth certain information concerning the grant
of options to purchase Common Stock to Messrs. Wendell, Swift and Radtke.
Neither of the other Named Executive Officers was granted stock options in the
year ended December 31, 1996.
<TABLE>
<CAPTION>
Option Grants in 1996
Potential Realizable Value at
Percent of Total Assumed Annual Rates of
Number of Securities Options Granted to Stock Appreciation for
Name and Underlying Options Employees Exercise Price Expiration Option Terms (1)
Principal Position Granted in Fiscal Year 1996 ($/Sh) Date 5% 10%
-------------------- --------- ------------------- -------- ----- -- ---
<S> <C> <C> <C> <C> <C>
David S. Wendell 40,000 10.3% $15.375 4/8/2006 $386,600 $980,200
President and Chief
Operating Officer
Robert P. Swift 15,000 3.9% $15.375 4/8/2006 $144,975 $367,575
Executive Vice President
Kenneth F. Radtke, Jr. 20,000 5.1% $15.375 4/8/2006 $193,300 $490,100
Executive Vice President
<FN>
(1) Potential Realizable Value is based on the assumed growth rates for an assumed ten-year option term. 5% annual growth
results in a Common Stock price per share of $25.04, and 10% results in a Common Stock price per share of $39.88,
respectively, for such term. The actual value, if any, an executive may realize will depend on the excess of the market
price of the Common Stock over the exercise price on the date the option is exercised, so that there is no assurance the
value realized by an executive will be at or near the amounts reflected in this table.
</FN>
</TABLE>
10
<PAGE>
The following table sets forth certain information with respect to the
unexercised options to purchase Common Stock to Messrs. Wendell, Swift and
Radtke. None of these individuals exercised any stock options during the year
ended December 31, 1996. Neither of the other Named Executive Officers has any
unexercised options.
<TABLE>
<CAPTION>
Fiscal Year End Option Values
Value of Unexercised
Number of Unexercised In-the-Money-Options at
Options at December 31, 1996 December 31, 1996(1)
----------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
David S. Wendell................................... 79,960 84,383 $1,900,329 $1,307,850
President and Chief Operating Officer
Robert P. Swift.................................... 15,420 26,952 $ 366,472 $ 429,123
Executive Vice President
Kenneth F. Radtke, Jr.............................. 795 25,110 $ 14,048 $ 380,966
Executive Vice President
- ----------
<FN>
(1) Based on a year-end value of $30.25 per share, less the exercise price.
</FN>
</TABLE>
Compensation Committee Report on Executive Compensation
The Compensation Committee consists entirely of Directors who are not
employees of the Company. It is the Compensation Committee's responsibility to
review, recommend and approve the Company's compensation policies and programs,
including all compensation for the Chief Executive Officer and the other
executive officers of the Company.
The Option Plan Subcommittee consists entirely of directors who are
both "non-employee" directors within the meaning of Rule 16b-3 under Section 16
of the Exchange Act and "outside" directors within the meaning of Section 162(m)
of the Code and the regulations thereunder, so that grants of options under the
Stock Incentive Plan to executive officers are exempt under Rule 16b-3 and
eligible for the "performance based" exception of Section 162(m) of the Code.
The Option Plan Subcommittee administers the Stock Incentive Plan and in
exercise of that function determines what grants of stock options, restricted
stock and stock appreciation rights thereunder are to be made to the Chief
Executive Officer and the other executive officers.
The Compensation Committee and Option Plan Subcommittee were
established in November 1995 in anticipation of the initial public offering of
the Company's Common Stock. Prior to the closing of the initial public offering,
the Board of Directors instituted the Stock Incentive Plan as a restatement of
its then-existing stock option plan. The purpose of the Stock Incentive Plan is
to encourage key employees, Directors, and consultants of the Company who render
services of special importance to, and who have contributed or are expected to
contribute materially to the success of, the Company to continue their
association with the Company by providing favorable opportunities for them to
participate in the ownership of the Company and in its future growth. Stock
options granted by the Option Plan Subcommittee in November 1995 to Messrs.
Wendell, Miller, Radtke and Swift as part of their compensation packages for
fiscal year 1996 were conditioned upon the closing of the initial public
offering in February 1996.
11
<PAGE>
The Option Plan Subcommittee made additional option grants to Messrs. Wendell,
Miller, Radtke and Swift in April 1996.
The Compensation Committee determined the salary levels of the
Company's executive officers, including the Chief Executive Officer, for fiscal
year 1997, as well as the amounts of bonuses paid in March 1997 for performance
in fiscal year 1996. The compensation policies implemented by the Compensation
Committee, which combine base salary and incentive compensation in the form of
cash bonuses and long-term stock options, are designed to achieve the operating
and acquisition strategies and goals of the Company. In particular, in
determining bonuses paid in 1997 in respect of 1996 and salary levels for fiscal
year 1996, the Compensation Committee took into account the past or expected
future contributions of each executive officer to the Company's strategic goals,
especially the efforts of each such officer in connection with (1) implementing
the initial public offering of the Company's Common Stock to provide liquidity
for the Company's stockholders and funding to support an accelerated growth
strategy, (2) pursuing and effecting the offering and sale of the Company's
101/8% Senior Subordinated Notes due 2006 (the "Notes") to augment available
funding for the Company's growth strategy, and (3) increasing the Company's
growth rate by successfully identifying, acquiring and integrating other records
management businesses, while at the same time maintaining the Company's internal
growth.
Section 162(m) of the Code generally disallows an income tax deduction
to public companies for compensation in excess of $1,000,000 paid in any year to
the chief executive officer or any of the four most highly compensated other
executive officers, to the extent that this compensation is not "performance
based" within the meaning of Section 162(m). Although the Compensation Committee
has not adopted any specific rules with respect to this issue, its general
policy, subject to all then prevailing relevant circumstances, is to attempt to
structure the compensation arrangements of the Company to maximize deductions
for federal income tax purposes.
COMPENSATION COMMITTEE
ARTHUR D. LITTLE, Chairman
CONSTANTIN R. BODEN
VINCENT J. RYAN
Compensation Committee Interlocks and Insider Participation
The present Compensation Committee consists of Mr. Little, who is the
Chairman, and Messrs. Boden and Ryan. Messrs. Reese and Doggett are executive
officers of Iron Mountain and Directors of Schooner. Mr. Ryan is Chairman of the
Board and principal stockholder of Schooner.
12
<PAGE>
Certain Transactions
Real Estate Transactions
Iron Mountain Records Management, Inc. ("IMRM"), a subsidiary of the
Company, is the tenant under a lease dated January 1, 1991 for a 31,500
square-foot building in Houston, Texas. The owner of the building is IM Houston
(CR) Limited Partnership, a Texas limited partnership, of which Mountain Realty,
Inc., a Massachusetts corporation whose sole stockholder is Mr. Ryan, is the
sole general partner, and the limited partners of which are Messrs. Ryan, Reese
and Doggett. The term of the lease expires December 31, 2000, with two five-year
extension options exercisable by IMRM. IMRM paid annual rent of approximately
$94,000 for the year ended December 31, 1996, and currently pays annual rent of
approximately $99,000, subject to adjustment in 1999 (and in the option periods
if the term is extended) based upon percentage changes in the consumer price
index, with a floor of 3% and a ceiling of 5%, compounded annually. As tenant,
IMRM is responsible for taxes, insurance and maintenance. The space is used by
IMRM as a records management facility. The lease is, in the opinion of
management, on commercially reasonable terms, no less favorable to IMRM than
could have been obtained from an unaffiliated party at the time of the
transaction.
Schooner leases space from the Company at the Company's corporate
headquarters. Such lease is a tenancy-at-will and may be terminated by either
the Company or Schooner at any time. As consideration for such lease, Schooner
pays rent to the Company based on its pro rata share of all expenses related to
the use and occupancy of the premises. The rent paid by Schooner to Iron
Mountain under such lease was approximately $68,000 in the year ended December
31, 1996.
Certain Indebtedness
Prior to October 1996, the Company was indebted to Schooner in the
principal amount of approximately $383,000 under a junior subordinated note
bearing interest at a rate of 8% per annum. This indebtedness was incurred by
Iron Mountain in 1990 in connection with an acquisition, and Schooner
subsequently acquired the note from the holder as an investment. The
indebtedness was repaid in full out of a portion of the net proceeds of the sale
of the Notes, which were sold on October 1, 1996.
Other Transactions
The Company paid compensation of $155,720 for the year ended December
31, 1996 to Mr. T. Anthony Ryan. Mr. Ryan is Vice President, Real Estate, of the
Company and is the brother of Mr. Vincent J. Ryan, a Director of the Company.
The Company believes that the terms of Mr. Ryan's employment are no less
favorable to it than would be negotiable with an unrelated third party.
13
<PAGE>
Performance Graph
The following graph compares the percentage change in the Company's
Common Stock to the cumulative total returns of the Nasdaq Market Index and the
Standard & Poor's Small Cap 600 Index (the "Small Cap Index") for the portion of
1996 that the Common Stock was traded on the Nasdaq National Market, assuming an
investment of $100 on February 1, 1996. There are no records management
companies directly comparable in size to the Company whose equity securities are
publicly traded and information from which an industry peer group could be
constructed is consequently unavailable. The Company has therefore elected to
use the Small Cap Index for comparison purposes. The cumulative return assumes
reinvestment of all dividends during each month. The performance of the
Company's Common Stock reflected below is not necessarily indicative of future
performance.
[GRAPHIC OMITTED]
Graph showing investment returns of Company, Nasdaq Market Index and S&P 600
Small Cap Index for period from February 1, 1996 to December 31, 1996.
14
<PAGE>
ITEM 2
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
Proposed Amendment
The Delaware General Corporation Law provides that the total number of
shares of each class of stock that a corporation is authorized to issue shall be
set forth in its Certificate of Incorporation. The Company's Amended and
Restated Certificate of Incorporation (the "Restated Certificate") presently
authorizes the Company to issue 13,000,000 shares of Common Stock.
As of April 1, 1997, 9,686,732 of the authorized shares were issued and
outstanding. If the Merger with Safesite is consummated, the Company could issue
a maximum of approximately 1,919,615 shares of Common Stock to holders of
Safesite Common Stock. In addition, options to acquire 782,448 shares of Common
Stock have been granted and are outstanding under the Stock Incentive Plan, and
454,590 shares of Common Stock have been reserved for issuance upon conversion
of outstanding shares of the Company's Nonvoting Common Stock. Taking into
account the foregoing uses, and assuming the issuance of the maximum number of
shares under the Merger Agreement and the grant of certain additional options as
discussed under Item 3 below, only approximately 140,000 shares of Common Stock
would remain available for other corporate purposes.
The Board of Directors has unanimously approved, and unanimously
recommends that the stockholders of the Company approve, a proposal to amend the
first sentence of Article FOURTH of the Restated Certificate to increase the
number of shares of Common Stock that the Company is authorized to issue from
13,000,000 to 20,000,000 shares. The full text of the first sentence of Article
FOURTH of the Certificate of Incorporation as proposed to be amended by this
proposal is as follows:
"FOURTH: The total number shares of all classes of capital
stock that Corporation shall have authority to issue is Twenty Three
Million (23,000,000) shares, of which:
"(i) Twenty Million (20,000,000) shall be Common Stock, par
value $.01 per share (the 'Common Stock'),
"(ii) One Million (1,000,000) shall be Nonvoting Common
Stock, par value $.01 per share (the 'Nonvoting
Common Stock' and together with the Common Stock, the
'Common Shares'), and
"(iii) Two Million (2,000,000) shall be Preferred Stock, par value
$.01 per share (the 'Preferred Stock')."
15
<PAGE>
Reasons for the Proposed Amendment
The Board of Directors believes that the current level of authorized
shares of Common Stock restricts the Company's ability to continue to issue or
reserve Common Stock for general corporate purposes. With the limited number of
shares currently available for issuance, it may be impractical for the Company
to evaluate or seek to consummate certain business acquisitions or other
transactions that, if they could be accomplished, might enhance stockholder
value. Additional authorized shares could also be used to raise cash through
sales of Common Stock to public and private investors.
The purpose of the proposed amendment is to provide sufficient
authorized shares of Common Stock to give the Board the flexibility to issue
Common Stock in the future in connection with acquisitions and other
transactions that management believes would provide the potential for growth and
for other general corporate purposes. If the proposed amendment is adopted,
there will be 6,993,653 shares of Common Stock authorized, unissued and
unreserved, based on the number of shares outstanding as of April 1, 1997. No
further action or authorization by the Company's stockholders would be necessary
prior to the issuance of additional shares of Common Stock, except as may be
required for a particular transaction by applicable law or regulatory agencies
or by the rules of the Nasdaq National Market or any stock exchange on which the
Company's securities may then be listed. If additional shares are available,
transactions dependent upon the issuance of additional shares would be less
likely to be impeded or undermined by delays and uncertainties occasioned by the
need to obtain prior stockholder authorization. The ability to issue shares, as
deemed in the Company's best interests by the Board, will also permit the
Company to avoid expenses incurred in holding special stockholders' meetings in
the future.
At the present time, the Board has no specific plans to issue
additional shares of Common Stock other than pursuant to the Merger Agreement
and in connection with routine grants under the Stock Incentive Plan or any
similar replacement plan. Stockholders of the Company have no preemptive rights
with respect to any shares of the Company's Common Stock.
Certain Effects of the Proposed Amendment
The issuance of additional shares of Common Stock by the Company could
have an antitakeover effect by making it more difficult to obtain stockholder
approval of various actions, such as a merger or removal of management. The
amendment to the Restated Certificate, if approved, could strengthen the
position of management and might make the removal of management more difficult,
even if removal would be generally beneficial to the Company's stockholders. The
authorization to issue the additional shares of Common Stock would provide
management with a capacity to counter the efforts of unfriendly tender offerors
by issuing securities to others who are friendly or desirable to management.
However, the submission of the proposed amendment to the Restated Certificate is
not a part of any present plan by the Company's management to adopt a series of
amendments to the Company's Certificate of Incorporation or Bylaws so as to
render the takeover of the Company more difficult.
The proposed amendment to the Restated Certificate is not the result of
management's knowledge of any specific effort to accumulate the Company's
securities or to obtain control of
16
<PAGE>
the Company by means of a merger, tender offer, proxy solicitation in opposition
to management or otherwise.
Required Vote
The affirmative vote of the holders of not less than sixty-six and
two-thirds per cent (662/3%) of the voting power of all outstanding shares of
Common Stock is required to approve the amendment to the Company's Restated
Certificate.
The Board of Directors recommends that the stockholders vote FOR the
proposal to amend the Company's Restated Certificate to increase the number of
authorized shares of Common Stock from 13,000,000 to 20,000,000.
17
<PAGE>
ITEM 3
AMENDMENT OF THE COMPANY'S STOCK INCENTIVE PLAN TO INCREASE
THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER
Prior to the initial public offering of the Company's common stock, the
Board of Directors and stockholders of the Company adopted the Stock Incentive
Plan and reserved 1,000,000 shares of Common Stock for issuance thereunder. By
resolutions adopted as of March 3, 1997 and April 14, 1997, the Board of
Directors adopted certain amendments to the Stock Incentive Plan (hereafter, as
so amended, the "Stock Incentive Plan") and also approved, and voted to
recommend that the stockholders approve, an amendment to the Stock Incentive
Plan to increase the number of shares of Common Stock authorized for issuance
under the Stock Incentive Plan from 1,000,000 to 1,400,000.
The Board of Directors believes that equity interests are a significant
factor in the Company's ability to attract, retain and motivate key employees,
Directors and advisors that are critical to the Company's long-tem success and
that an increase in the number of shares available for issuance under the Stock
Incentive Plan is necessary in order to provide key employees, Directors and
consultants of the Company with incentives to serve the Company.
As of April 1, 1997, options for an aggregate of 782,448 shares of
Common Stock had been granted and were outstanding under the Stock Incentive
Plan at exercise prices ranging from $6.484 to $30.375 per share and 162,455
shares were available for grants of options and other rights under the Stock
Incentive Plan. In addition, options for an aggregate of 16,102 shares of Common
Stock have been conditionally granted to certain Safesite employees (the
"Safesite Options"), which will become effective if the Merger is consummated
and those employees become employees of the Company. The exercise price of the
Safesite Options has not yet been determined. If the amendment is approved,
562,455 shares of Common Stock will be available for grants of options
(including the Safesite Options) and other rights under the Stock Incentive
Plan. On April 1, 1997, the closing price per share of the Common Stock, as
reported in a summary of composite transactions in The Wall Street Journal for
stocks listed on the Nasdaq National Market, was $251/8.
Stock Option Information
The following summary of the material features of the Stock Incentive Plan is
qualified in its entirety by reference to the full text of the Stock Incentive
Plan, as amended through April 14, 1997.
Purpose, Participants, Effective Date and Duration. Effective November
30, 1995, the Company instituted the Stock Incentive Plan, which was amended by
resolutions adopted as of March 3, 1997 and April 14, 1997, as a restatement of
its then-existing stock option plan. The purpose of the Stock Incentive Plan is
to encourage key employees, Directors and consultants of the Company and its
"Subsidiaries" (a corporation the voting power of which is at least 50% owned by
the Company, directly or indirectly) who render services of special importance
to, and who have contributed or may be expected to contribute materially to the
success of, the Company or a Subsidiary to continue their association with the
Company and its Subsidiaries by providing favorable opportunities for them to
participate in the ownership of the Company and in its future
18
<PAGE>
growth through the granting of restricted shares ("Restricted Stock"), options
to acquire Common Stock ("Options"), stock appreciation rights ("SARs") and
other rights to compensation in amounts determined by the value of the Common
Stock. Restricted Stock, SARs and other rights are referred to collectively as
"Other Rights." The Stock Incentive Plan will terminate on November 26, 2005,
unless earlier terminated by the Board of Directors. Termination of the Stock
Incentive Plan will not affect awards made prior to termination, but awards will
not be made after the Stock Incentive Plan terminates.
Shares Subject to the Stock Incentive Plan. The total number of shares
of Common Stock that may be subject to Options and Other Rights under the Stock
Incentive Plan (the "Reserved Shares") may not exceed 1,000,000. However, if
approved by the stockholders, the number of Reserved Shares will be increased to
1,400,000. These shares may be authorized but unissued shares or treasury
shares. In the event of any change in the number or kind of Common Stock
outstanding pursuant to a reorganization, recapitalization, exchange of shares,
stock dividend or split or combination of shares, appropriate adjustments to the
Reserved Shares and the number of shares subject to outstanding grants or
awards, in the exercise price per share of outstanding Options and in the kind
of shares that may be distributed under the Stock Incentive Plan will be made.
The total amount of Reserved Shares that may be granted to any single employee
under the Stock Incentive Plan may not exceed in the aggregate 250,000. Shares
will be deemed issued under the Stock Incentive Plan only to the extent actually
issued pursuant to an award or settled in cash or shares. To the extent that an
award under the Stock Incentive Plan lapses or is forfeited, any shares subject
to such award will again become available for grant under the terms of the Stock
Incentive Plan.
Administration. The Stock Incentive Plan may be administered by the
Board of Directors or, at the Board's discretion, by a committee or subcommittee
of the Board (the "Option Plan Committee"). Currently, the Option Plan
Subcommittee, which is a subcommittee of the Compensation Committee of the
Board, administers the Stock Incentive Plan. Each member of the Option Plan
Committee must (i) so long as Section 16 of the Exchange Act is applicable to
the Company, be a "non-employee director" or the equivalent within the meaning
of Rule 16b-3 under the Exchange Act, and (ii) so long as Section 162(m) of the
Code is applicable to the Company, be an "outside director" within the meaning
of Section 162(m) of the Code and the regulations thereunder. The Option Plan
Committee selects those persons to receive awards under the Stock Incentive Plan
("Participants") and determines the terms and conditions of all awards.
Subject to the terms of the Stock Incentive Plan, the Option Plan
Committee has authority to (i) select the persons to whom Options and Other
Rights shall be granted, (ii) determine the number or value and the terms and
conditions of Options or Other Rights granted to each such person, including the
price per share to be paid upon exercise of any Option and the period within
which each such Option or Other Right may be exercised, and (iii) interpret the
Stock Incentive Plan and prescribe rules and regulations for the administration
thereof.
Stock Options. The Option Plan Committee may grant awards to
Participants in the form of Options. With regard to each Option, the Option Plan
Committee determines the number of shares of Common Stock subject to the Option,
the exercise price of the Option, the manner and time of exercise of the Option
and whether the Option is intended to qualify as an incentive stock
19
<PAGE>
option (an "ISO") within the meaning of Section 422 of the Code. Options that
are not intended to qualify as ISOs are referred to as non-qualified stock
options ("NSOs"). In the case of an ISO, the exercise price may not be less than
the "fair market value" of the Reserved Shares on the date the Option is
granted; provided, however, that in the case of an employee who owns (or is
considered to own under Section 424(d) of the Code) stock possessing more than
ten per cent of the total combined voting power of all classes of stock of the
Company or any of its Subsidiaries, the price at which Common Stock may be
purchased pursuant to an ISO may not be less than 110% of the fair market value
of the Common Stock on the date the ISO is granted.
The duration of the ISOs and NSOs granted under the Stock Incentive
Plan may be specified pursuant to the particular stock option agreement, but in
no event can any ISO be exercisable after the expiration of ten years after the
date of grant. In the case of any employee who owns (or is considered under
Section 424(d) of the Code as owning) stock possessing more than ten per cent of
the total combined voting power of all classes of stock of the Company or any of
its Subsidiaries, no ISO shall be exercisable after the expiration of five years
from its date of grant. The Option Plan Committee, in its discretion, may
provide that any Option is exercisable during its entire duration or during any
lesser period of time.
The option exercise price may be paid in cash, in shares of Common
Stock owned by the optionee, by delivery of a recourse promissory note secured
by the Common Stock acquired upon exercise of the Option or by means of a
"cashless exercise" procedure in which a broker transmits to the Company the
exercise price in cash, either as a margin loan or against the optionee's notice
of exercise and confirmation by the Company that it will issue and deliver to
the broker stock certificates for that number of Reserved Shares having an
aggregate fair market value equal to the exercise price or agrees to pay the
Option price to the Company in cash upon its receipt of stock certificates. In
its discretion, the Option Plan Committee may grant a new option to purchase the
number of shares of Common Stock delivered to the Company in full or partial
payment of the option price, on the exercise of any Option, or in full or
partial payment of the tax withholding obligations resulting from the exercise
of any Option.
Stock Appreciation Rights. The Option Plan Committee may grant SARs to
Participants as to such number of Reserved Shares and on such terms and
conditions as it may determine. SARs may be granted separately or in connection
with ISOs or NSOs. Upon exercise of an SAR, the holder is entitled to receive
payment equal to the excess of the fair market value, on the date of exercise,
of the number of Reserved Shares for which the SAR is exercised, over the
exercise price for such Reserved Shares under a related Option, or if there is
no related Option, over an amount per share stated in the written agreement
setting forth the terms and conditions of the SAR. Payment may be made in cash
or other property, including Common Stock, in accordance with the provisions of
an SAR agreement. Upon the exercise of an SAR related to an Option, the Option
terminates as to the number of Reserved Shares for which the SAR is exercised.
Restricted Stock. The Option Plan Committee may grant to Participants a
number of shares of Restricted Stock determined in its discretion, subject to
terms and conditions so determined by it, including conditions that may require
the holder to forfeit the Common Stock in the event that the holder ceases to
provide services to the Company or a Subsidiary before a stated time. Unlike
holders of Options and SARs, a holder of Restricted Stock has the rights
20
<PAGE>
of a stockholder of the Company to vote and to receive payment of dividends on
the Restricted Stock, unless the Option Plan Committee specifies to the contrary
in the restricted stock agreement setting forth the terms on which the
Restricted Stock is granted.
Special Bonus Awards. The Company may grant in connection with any NSO
or grant of Restricted Stock a special cash bonus in an amount not to exceed the
lesser of (i) the combined federal, state and local income tax liability
incurred by the optionee as a consequence of the acquisition of stock pursuant
to the exercise of the NSO or the grant or vesting of the Restricted Stock, and
the related special bonus, or (ii) 30% of the imputed income realized by the
optionee on account of such exercise or vesting, and the related special bonus.
A grant may also provide that the Company will lend an optionee an amount not
more than the amount described in the preceding sentence, less the amount of any
special cash bonus.
Forfeiture for Dishonesty. If the Board of Directors determines that an
optionee has engaged in fraud, embezzlement, theft, commission of a felony or
proven dishonesty in the course of his employment that damaged the Company or
has disclosed trade secrets or other proprietary information of the Company, (a)
the optionee shall forfeit all unexercised Options and all exercised Options
under which the Company has not yet delivered certificates, and (b) the Company
shall have the right to repurchase all or any part of the shares of Common Stock
acquired by the optionee upon the earlier exercise of any Option, at a price
equal to the amount paid to the Company upon exercise, together with interest as
determined pursuant to the terms of the Stock Incentive Plan. The decision of
the Board of Directors as to the cause of an optionee's discharge and the damage
done to the Company is final, binding and conclusive.
Noncompetition Restrictions. Every Participant is required to enter
into a noncompetition agreement with the Company. The noncompetition agreement
provides generally that, for a period of two years following termination of
employment with the Company, an employee cannot work in the records management
industry at a competitor located within 50 miles of the Iron Mountain facility
where the employee worked. All option agreements currently provide that Options
may not be exercised if at the time of exercise the optionee is in violation of
the noncompetition agreement (the Option Plan Committee may, in its discretion
and without stockholder approval, waive this restriction or elect not to include
it in future option agreements). The Option Plan Committee may also, and
presently does, provide in any stock option agreement that if an optionee
accepts employment with a competitor within two years after the date of exercise
of all or any portion of an Option, the optionee shall pay to the Company an
amount equal to the excess of the fair market value of the shares as to which
the Option was exercised on that date, over the price paid for such shares. The
Option Plan Committee may, in its discretion and without stockholder approval,
release the optionee from this repayment requirement if the Option Plan
Committee determines that the optionee's acceptance of employment with a
competitor is not adverse to the interests of the Company.
The following description of the federal income tax consequences of
Options and Other Rights is general and does not purport to be complete.
Tax Treatment of Options. An optionee realizes no taxable income when
an NSO is granted. Instead, the difference between the fair market value of the
Common Stock subject to the NSO and the exercise price paid is taxed as ordinary
compensation income when the NSO
21
<PAGE>
is exercised. The difference is measured and taxed as of the date of exercise,
if the stock is not subject to a "substantial risk of forfeiture," or as of the
date or dates on which the risk terminates in other cases. An optionee may elect
to be taxed on the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise, even though some or all of
the Common Stock acquired is subject to a substantial risk of forfeiture. Gain
on the subsequent sale of the Common Stock is taxed as capital gain. The Company
receives no tax deduction on the grant of a NSO, but is entitled to a tax
deduction when the optionee recognizes taxable income on or after exercise of
the NSO, in the same amount as the income recognized by the optionee.
Generally, an optionee incurs no federal income tax liability on either
the grant or the exercise of an ISO, although an optionee will generally have
taxable income for alternative minimum tax purposes at the time of exercise
equal to the excess of the fair market value of the stock acquired over the
exercise price. If the shares of Common Stock are held for at least one year
after the date of exercise of the related ISO and at least two years after its
date of grant, any gain realized on subsequent sale of the stock will be taxed
as long-term capital gain. If the stock is disposed of within a shorter period
of time, the optionee will be taxed as if the optionee had then received
ordinary compensation income in an amount equal to the difference between the
fair market value of the stock on the date of exercise of the ISO and its fair
market value on its date of grant. The Company receives no tax deduction on the
grant or exercise of an ISO, but is entitled to a tax deduction if the optionee
recognizes taxable income on account of a premature disposition of ISO stock, in
the same amount and at the same time as the optionee's recognition of income.
Tax Treatment of SARs. A recipient incurs no imputed income upon the
grant of an SAR, but upon its exercise realizes ordinary compensation income in
an amount equal to the cash or cash equivalent that he received at that time. If
the recipient receives shares of Common Stock upon exercise of the SAR, the
recipient incurs imputed income measured by the difference between the base
amount set forth in the SAR agreement and the fair market value of the Common
Stock at the exercise date (or, if at the exercise date the stock is subject to
a substantial risk of forfeiture, at the date or dates on which the risk
expires).
Tax Treatment of Restricted Stock. A person who receives a grant of
Restricted Stock generally will not recognize taxable income at the time the
award is received, but will recognize ordinary compensation income when
restrictions constituting a substantial risk of forfeiture lapse. The amount of
imputed income will be equal to the excess of the aggregate fair market value,
as of the date the restrictions lapse, over the amount (if any) paid by the
holder for the Restricted Stock. Alternatively, a recipient of Restricted Stock
may elect to be taxed on the excess of the fair market value of the Restricted
Stock at the time of grant over the amount (if any) paid by the recipient for
the Restricted Stock, notwithstanding the restrictions on the stock. All such
taxable amounts are deductible by the Company at the time and in the amount of
the ordinary compensation income recognized by the recipient of the Restricted
Stock.
Parachute Payments. Under certain circumstances, an accelerated vesting
or the cash out of Options or Other Rights in connection with a Change of
Control (as defined below) of the Company might be deemed an "excess parachute
payment" for purposes of the golden parachute
22
<PAGE>
tax provisions of Section 280G of the Code. To the extent it is so considered, a
Participant may be subject to a 20% excise tax and the Company may be denied an
income tax deduction.
Effect of Certain Corporate Transactions. If the Company merges or
consolidates with one or more corporations (whether or not the Company is the
surviving corporation) while unexercised Options or SARs remain outstanding
under the Stock Incentive Plan, or if the Company is liquidated or sells or
otherwise disposes of substantially all of its assets to another entity, or upon
a Change of Control (any of these events is hereafter referred to as a
"Transaction"), then, except as otherwise specifically provided to the contrary
in any applicable agreement, the Option Plan Committee, in its discretion, may
amend the terms of all outstanding Options and SARs so that either: (i) the
optionees shall be given an opportunity to exercise all outstanding Options and
SARs according to their terms during the period of 20 days ending on the day
preceding the effective date of the Transaction, and any Options and SARs that
are still outstanding and unexercised as of the effective date of the
Transaction shall be cancelled; (ii) after the effective date of the
Transaction, each optionee shall be entitled, upon exercise of an Option or SAR,
to receive in lieu of shares of Common Stock the number and class of shares of
such stock or other securities to which such person would have been entitled
pursuant to the terms of the Transaction as the holder of record of the number
of shares of Common Stock as to which the Option or SAR is being exercised, or
shall be entitled to receive from the successor entity a new stock option or
stock appreciation right of comparable value; or (iii) all outstanding Options
and SARs shall be cancelled as of the effective date of the Transaction and the
optionee shall receive cash or other consideration with a value equal to the
value of the shares the optionee would have received had the Option then been
exercised (to the extent exercisable). If the Option Plan Committee adopts the
course of action described in clause (i) of the preceding sentence, it may, in
its sole discretion, accelerate the vesting of an Option or SAR that is not
immediately exercisable.
A "Change of Control" shall be deemed to have occurred if any person
(as such term is used in Section 13(d) and 14(d)(2) of the Exchange Act) becomes
the beneficial owner of 50% or more of the outstanding Common Stock, and within
the period of 24 consecutive months immediately thereafter, individuals other
than (i) individuals who at the beginning of such period constitute the entire
Board of Directors or (ii) individuals whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least
two-thirds of the Directors then still in office who were Directors at the
beginning of the period, become a majority of the Board of Directors.
On April 14, 1997, the Board of Directors adopted an amendment to the
Stock Incentive Plan that provides that, in the event of certain mergers or
consolidations, the vesting of Options and SARs will accelerate and the Options
and SARs will remain fully exercisable following the transaction. Additional
information about the amendment, which is subject to approval by the
stockholders, appears under the discussion of Item 4 below.
Amendments to Stock Incentive Plan. The Board of Directors may modify,
revise or terminate the Stock Incentive Plan at any time and from time to time,
except that approval of the stockholders of the Company is required with respect
to any amendment that changes the aggregate number of Reserved Shares that may
be issued under Options or granted pursuant to the Stock Incentive Plan, changes
the class of employees or other persons eligible to receive Options or Other
Rights, reduces the exercise price of any ISO, extends the latest date on which
an ISO can be exercised, increases materially the benefits accruing to any
person under the Stock Incentive Plan, or makes any other change that requires
stockholder approval under applicable law.
23
<PAGE>
Required Vote
The affirmative vote of holders of a majority of the shares cast at the
Annual Meeting is required to approve the amendment of the Stock Incentive Plan
to increase the number of shares of Common Stock issuable thereunder to
1,400,000.
The Board of Directors recommends that the stockholders vote FOR the
approval of the amendment to the Stock Incentive Plan.
24
<PAGE>
ITEM 4
AMENDMENT OF THE COMPANY'S STOCK INCENTIVE PLAN
TO PROVIDE FOR ACCELERATED VESTING AND CONVERSION
OF OPTIONS AND SARs IN CERTAIN CIRCUMSTANCES
Proposed Amendment
Section 11 of the Stock Incentive Plan now provides in part that in the
event of a merger or consolidation between the Company and one or more other
corporations (whether or not the Company is the surviving corporation) the
Option Plan Committee has the discretion to amend the terms of outstanding
Options and SARs. The Option Plan Committee's discretionary authority includes
the power to convert the Option or SAR, to cancel the Option or SAR after
affording holders an opportunity to exercise, including by eliminating any
vesting restrictions, or to cash-out an outstanding Option or SAR. (A more
detailed discussion of the Option Plan Committee's existing authority appears in
the discussion entitled "Stock Option Information-Effect of Certain Corporate
Transactions" in Item 3 above.)
The Board of Directors has unanimously approved, and unanimously
recommends that the stockholders of the Company approve, a proposal to amend
Section 11 of the Stock Incentive Plan by adding a new paragraph thereto that
automatically accelerates the vesting of Options and SARs and provides for a
conversion of the Options and SARs in certain circumstances. The text of Section
11 of the Stock Incentive Plan as proposed to be amended by the addition of a
new fifth paragraph is attached to this proxy statement as Exhibit A.
The proposed amendment provides that the vesting of Options and SARs
will automatically accelerate and the Options and SARs will fully convert if (1)
the Company or any wholly owned subsidiary of the Company is a party to a merger
or consolidation (whether or not the Company is the surviving corporation) in
any transaction or series of related transactions and (2) after the merger or
consolidation (a) individuals who immediately prior to the merger or
consolidation served as members of the Board of Directors no longer constitute a
majority of the Board of Directors or the board of directors of the surviving
corporation and (b) the voting securities of the Company outstanding immediately
prior to the merger or consolidation do not represent (either by remaining
outstanding or upon conversion into securities of the surviving corporation)
more than 50% of the voting power of the securities of the Company or the
surviving corporation. As a result, any vesting restrictions on the exercise of
Options or SARs will be cancelled as of the date of the merger or consolidation
and each holder of Options and SARs will be entitled to receive upon exercise of
his or her Options and SARs the number and class of shares of stock or other
securities and any other consideration of the surviving or resulting corporation
that the optionee would have been entitled to receive pursuant to the merger or
consolidation had the optionee held the shares of Common Stock subject to the
Option.
25
<PAGE>
Reasons for the Proposed Amendment
If the discretionary authority of the Option Plan Committee is not
eliminated, the Company's ability to elect to adopt certain accounting methods
in certain mergers or consolidations would be curtailed, restricting the Company
to methods that could be adverse to the interests of the Company and its
stockholders. The Company is not presently engaged in or contemplating any such
transaction.
Required Vote
The affirmative vote of holders of a majority of the shares cast at the
Annual Meeting is required to approve the amendment of the Stock Incentive Plan
to provide for accelerated vesting of options and other rights in the event of
certain mergers or consolidations.
The Board of Directors recommends that the stockholders vote FOR the
approval of the amendment to the Stock Incentive Plan.
26
<PAGE>
ITEM 5
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Subject to ratification by the stockholders, the Board of Directors has
selected the firm of Arthur Andersen LLP as the Company's independent public
accountants for the current year. Arthur Andersen LLP has served as the
Company's independent public accountants since 1988.
Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
If the stockholders do not ratify the selection of Arthur Andersen LLP
as the Company's independent public accountants, the selection of accountants
will be reconsidered by the Board of Directors.
Required Vote
The affirmative vote of holders of a majority of the shares cast at the
Annual Meeting is required to ratify the selection of Arthur Andersen LLP.
The Board of Directors recommends that the stockholders vote FOR the
ratification of the selection of Arthur Andersen LLP to serve as the Company's
independent public accountants for the current fiscal year.
ADDITIONAL INFORMATION
Other Matters
The Board of Directors does not know of any other matters that may come
before the Annual Meeting. However, if any other matters are properly presented
to the meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in accordance with their best judgment on such
matters.
Section 16(a) of Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and
Directors, and persons who own more than ten per cent of a registered class of
the Company's equity securities, to file reports of ownership on Form 3 and
changes in ownership on Form 4 or 5 with the Securities and Exchange Commission
(the "SEC"). Such officers, Directors and ten per cent stockholders are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
reports they file. Based solely on its review of the copies of such forms
received by it, or written representation from certain reporting persons that
they were not required to file a Form 5, the Company believes that, during the
fiscal year ended December 31, 1996, its officers, Directors and ten per cent
stockholders complied with all Section 16(a) filing requirements applicable to
such persons, except that David S. Wendell, Kenneth F. Radtke, Jr.
27
<PAGE>
and Jean A. Bua, all officers of the Company, filed their initial statements of
beneficial ownership on Form 3 late.
Proposals of Stockholders
The Company expects to hold its 1998 Annual Meeting on May __, 1998. A
stockholder who intends to present a proposal at the 1998 Annual Meeting of
Stockholders for inclusion in the Company's 1998 proxy statement and proxy card
relating to that meeting must submit the proposal by January __, 1998. In order
for the proposal to be included in the proxy statement, the stockholder
submitting the proposal must meet certain eligibility standards and comply with
certain procedures established by the SEC, and the proposal must comply with the
requirements as to form and substance established by applicable laws and
regulations. The proposal must be mailed to the Company's principal executive
office, at the address stated herein, and should be directed to the attention of
the Chief Financial Officer.
By Order of the Board of Directors
JAS. MURRAY HOWE, Secretary
April 30, 1997
28
<PAGE>
EXHIBIT A
PROPOSED TEXT OF SECTION 11 OF THE
IRON MOUNTAIN INCORPORATED 1995 STOCK INCENTIVE PLAN
"11. CHANGES IN CAPITAL STRUCTURE
"In the event that the outstanding shares of Common Stock are hereafter
changed for a different number or kind of shares or other securities of the
Company, by reason of a reorganization, recapitalization, exchange of shares,
stock split, combination of shares or dividend payable in shares or other
securities, a corresponding adjustment shall be made by the Committee in the
number and kind of shares or other securities covered by outstanding Options and
Other Rights, and for which Options or Other Rights may be granted under the
Plan. Any such adjustment in outstanding Options or Other Rights shall be made
without change in the total price applicable to the unexercised portion of the
Option, but the price per share specified in each Stock Option Agreement or
agreement as to Other Rights shall be correspondingly adjusted; provided,
however, that no adjustment shall be made with respect to an ISO that would
constitute a modification as defined in Section 424 of the Code. Any such
adjustment made by the Committee shall be conclusive and binding upon all
affected persons, including the Company and all Optionees.
"If while unexercised Options or SARs remain outstanding under the Plan
the Company merges or consolidates with a wholly-owned subsidiary for the
purpose of reincorporating itself under the laws of another jurisdiction, the
Optionees will be entitled to acquire shares of Common Stock of the
reincorporated Company upon the same terms and conditions as were in effect
immediately prior to such reincorporation (unless such reincorporation involves
a change in the number of shares or the capitalization of the Company, in which
case proportional adjustments shall be made as provided above) and the Plan,
unless otherwise rescinded by the Board, will remain the Plan of the
reincorporated Company.
"Except as otherwise provided in the preceding paragraph, if while
unexercised Options or SARs remain outstanding under the Plan the Company merges
or consolidates with one or more corporations (whether or not the Company is the
surviving corporation), or is liquidated or sells or otherwise disposes of
substantially all of its assets to another entity, or upon a Change of Control
(as defined herein), then, except as otherwise specifically provided to the
contrary in an Optionee's Stock Option Agreement, SAR Agreement or Restricted
Stock Agreement, the Committee, in its discretion, shall amend the terms of all
outstanding Options and SARs so that either:
"(i) after the effective date of such merger,
consolidation, sale or Change of Control, as the case
may be, each Optionee shall be entitled, upon
exercise of an Option or SAR, to receive in lieu of
shares of Common Stock the number and class of shares
of such stock or other securities to which he would
have been entitled pursuant to the terms of the
merger,
29
<PAGE>
consolidation, sale or Change of Control if he had
been the holder of record of the number of shares of
Common Stock as to which the Option or SAR is being
exercised, or shall be entitled to receive from the
successor entity a new stock option or stock
appreciation right of comparable value; or
"(ii) all outstanding Options and SARs shall be cancelled
as of the effective date of any such merger,
consolidation, liquidation, sale or Change of
Control, provided that each Optionee shall have the
right to exercise his Option or SAR according to its
terms during the period of twenty (20) days ending on
the day preceding the effective date of such merger,
consolidation, liquidation, sale or Change of
Control; and in addition to the foregoing, the
Committee may in its discretion amend the terms of an
Option or SAR by cancelling some or all of the
restrictions on its exercise, to permit its exercise
pursuant to this paragraph (ii) to a greater extent
than that permitted on its existing terms; or
"(iii) all outstanding Options and SARs shall be cancelled
as of the effective date of any such merger,
consolidation, liquidation, sale or Change of Control
in exchange for consideration in cash or in kind,
which consideration in both cases shall be equal in
value to the value of those shares of stock or other
securities the Optionee would have received had the
Option been exercised (to the extent then
exercisable) and no disposition of the shares
acquired upon such exercise had been made prior to
such merger, consolidation, liquidation, sale or
Change in Control, less the option price therefor.
Upon receipt of such consideration by the Optionee,
his or her Option shall immediately terminate and be
of no further force and effect. The value of the
stock or other securities the Optionee would have
received if the Option had been exercised shall be
determined in good faith by the Committee, and in the
case of shares of the Common Stock of the Company, in
accordance with the provisions of Section 5(b).
"A 'Change of Control' of the Company shall be deemed to have occurred
if any person (as such term is used in Section 13(d) and 14(d)(2) of the
Exchange Act) other than a trust related to an employee benefit plan maintained
by the Company becomes the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of fifty percent (50%) or more of the Company's
outstanding Common Stock, and within the period of twenty-four (24) consecutive
months immediately thereafter, individuals other than (a) individuals who at the
beginning of such period constitute the entire Board of Directors or (b)
individuals whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the period, become a
majority of the Board of Directors.
"Notwithstanding any provision of this Section 11 to the contrary, if
while unexercised Options or SARs remain outstanding under the Plan the Company
or a wholly owned subsidiary of the Company merges or consolidates with one or
more corporations (whether or not the
30
<PAGE>
Company is the surviving corporation) in any transaction or series of related
transactions and there is a Limited Change of Control (as defined herein), then
the terms of all outstanding Options and SARs shall be amended so that any
vesting restrictions on the exercise of the Option or SAR shall be cancelled as
of the effective date of the merger or consolidation and, if the Company is not
the surviving corporation, after the effective date of such merger or
consolidation each Optionee shall be entitled, upon exercise of an Option or
SAR, to receive in lieu of shares of Common Stock the number and class of shares
of such stock or other securities and such other consideration to which he would
have been entitled as a result of the terms of the merger or consolidation if he
had been the holder of record of the number of shares of Common Stock as to
which the Option or SAR is being exercised. A 'Limited Change of Control' shall
be deemed to have occurred if (i) following the merger or consolidation
individuals serving as members of the Board immediately prior to the merger or
consolidation no longer constitute a majority of the individuals serving as
members of the Board (or the board of directors of the surviving corporation)
and (ii) the voting securities of the Company outstanding immediately prior to
the merger or consolidation do not represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity) more than 50%
of the voting power of the securities of the Company or the surviving entity
outstanding immediately after the merger or consolidation.
"Except as expressly provided to the contrary in this Section 11, the
issuance by the Company of shares of stock of any class for cash or property or
for services, either upon direct sale or upon the exercise of rights or
warrants, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect the number, class or
price of shares of Common Stock then subject to outstanding Options or SARs."
31
<PAGE>
April 30, 1997
Dear Stockholder:
It is a pleasure to invite you to the Company's 1997 Annual Meeting in
Boston, Massachusetts on Thursday, May 29, 1997, at 10:00 a.m., local time, at
the offices of Sullivan & Worcester LLP, 23rd Floor, One Post Office Square,
Boston, Massachusetts.
The Annual Report to Stockholders, Notice of Meeting, proxy statement
and form of proxy are included herein. The matters listed in the Notice of
Meeting are described in detail in the proxy statement.
The vote of every stockholder is important. Mailing your completed
proxy will not prevent you from voting in person at the meeting if you wish to
do so.
Please sign, date and promptly mail your proxy. Your cooperation will
be greatly appreciated.
Your Board of Directors and management look forward to greeting those
stockholders who are able to attend.
Sincerely,
C. RICHARD REESE
Chairman of the Board and
Chief Executive Officer
<PAGE>
Preliminary Draft dated April 14, 1997 (2:29pm)
[FRONT]
IRON MOUNTAIN INCORPORATED
745 ATLANTIC AVENUE
BOSTON, MASSACHUSETTS 02111
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints C. RICHARD REESE, DAVID S. WENDELL AND EUGENE B.
DOGGETT, and each of them, as proxies of the undersigned, each with the power to
appoint his or her substitute, and hereby authorizes a majority of them, or any
one if only one be present, to represent and to vote, as designated on the
reverse hereof, all the Common Stock, $.01 par value per share, of Iron Mountain
Incorporated held of record by the undersigned or with respect to which the
undersigned is entitled to vote or act at the Annual Meeting of Stockholders to
be held on May 29, 1997 or any adjournment or postponement thereof.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholders. If no direction is made, this proxy will be voted
FOR Proposals 1, 2, 3, 4 and 5.
Address Change/Comments:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Continued and to be signed on Reverse Side)
SEE REVERSE
SIDE
<PAGE>
Preliminary Draft dated April 14, 1997 (2:29pm)
[BACK]
|X| Please mark votes as in
this example
1. Election of the following Directors:
FOR WITHHOLD
C. Richard Reese / / / /
FOR WITHHOLD
Arthur D. Little / / / /
2. Proposal to increase the number FOR AGAINST ABSTAIN
of authorized shares of Common / / / / / /
Stock from 13,000,000 to
20,000,000.
3. Proposal to increase the number FOR AGAINST ABSTAIN
of shares of Common Stock / / / / / /
authorized for issuance under the
Company's Stock Incentive Plan
to from 1,000,000 to 1,400,000.
4. Proposal to amend the FOR AGAINST ABSTAIN
Company's Stock Incentive Plan / / / / / /
to permit accelerated vesting and
conversion of options in certain
circumstances.
5. Ratification of the selection by FOR AGAINST ABSTAIN
the Board of Directors of Arthur / / / / / /
Andersen LLP as independent
public accountants for 1997.
6. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come
before the meeting.
MARK HERE IF COMMENTS OR ADDRESS CHANGE / / HAVE BEEN NOTED ON THE REVERSE SIDE
OF THIS CARD.
Note: Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please
sign in full corporate name by an authorized officer
or if a partnership, please sign in partnership name
by an authorized person.
Signature: Date:
Signature: Date:
<PAGE>
IRON MOUNTAIN INCORPORATED1
1995 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this 1995 Stock Incentive Plan (the "Plan") is to
encourage key employees, directors, and consultants of Iron Mountain
Incorporated (the "Company") and its Subsidiaries (as hereinafter defined) to
continue their association with the Company, by providing favorable
opportunities for them to participate in the ownership of the Company and in its
future growth through the granting of awards ("Awards") of stock, stock options,
and other rights to compensation in amounts determined by the value of the
Company's stock. The term "Subsidiary" as used in the Plan means a corporation
of which the Company owns, directly or indirectly through an unbroken chain of
ownership, fifty percent (50%) or more of the total combined voting power of all
classes of stock.
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors of the Company
(the "Board") or, in the discretion of the Board, a committee or subcommittee of
the Board (the "Committee"), appointed by the Board and composed of at least two
(2) members of the Board. In the event that a vacancy on the Committee occurs on
account of the resignation of a member or the removal of a member by vote of the
Board, a successor member shall be appointed by vote of the Board. All
references in the Plan to the "Committee" shall be understood to refer to the
Committee or the Board, whoever shall administer the Plan.
For so long as Section 16 of the Securities Exchange Act of 1934, as
amended from time to time (the "Exchange Act"), is applicable to the Company,
each member of the Committee shall be a "non-employee director" or the
equivalent within the meaning of Rule 16b-3 under the Exchange Act, and, for so
long as Section 162(m) of the Internal Revenue Code of 1986, as amended from
time to time (the "Code"), is applicable to the Company, an "outside director"
within the meaning of Section 162 of the Code and the regulations thereunder.
The Committee shall select those persons to receive Awards under the Plan
("Participants") and determine the terms and conditions of all Awards.
The Committee shall select one of its members as Chairman and shall
hold meetings at such times and places as it may determine. A majority of the
Committee shall constitute a quorum, and acts of the Committee at which a quorum
is present, or acts reduced to or approved in writing by all the members of the
Committee, shall be the valid acts of the Committee. The Committee shall have
the authority to adopt, amend, and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan. All questions of
interpretation and application of such
- --------
1 Incorporates amendments adopted by the Board of Directors on March 3, 1997.
<PAGE>
-2-
rules and regulations, of the Plan and of options granted thereunder (the
"Options"), and of Common Stock transferred subject to restrictions under the
Plan ("Restricted Stock"), and stock appreciation rights granted under the Plan
("SARs") (collectively, "Other Rights") shall be subject to the determination of
the Committee, which shall be final and binding.
With respect to persons subject to Section 16 of the Exchange Act
("Insiders"), transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successor under the Exchange Act. To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed to be modified so as to be in compliance with such
Rule, or, if such modification is not possible, it shall be deemed to be null
and void, to the extent permitted by law and deemed advisable by the Committee.
The Plan shall be administered in such a manner as to permit those
Options granted hereunder and specially designated under Section 5 to qualify as
incentive stock options as described in Section 422 of the Code.
3. STOCK SUBJECT TO THE PLAN
The total number of shares of stock which may be subject to Options and
Other Rights under the Plan shall be 1,400,000 of the Company's outstanding
Class A Common Stock, $0.01 par value per share, from either authorized but
unissued shares or treasury shares. For purposes of the limitation set forth in
the preceding sentence, options granted under the Iron Mountain Information
Services, Inc. Stock Option Plan and outstanding on the effective date of this
Plan shall be treated as Options. The number of shares stated in this Section 3
shall be subject to adjustment in accordance with the provisions of Section 11.
Shares of Restricted Stock that fail to vest, and shares of Common Stock subject
to an Option that is neither fully exercised prior to its expiration or other
termination nor terminated by reason of the exercise of an SAR related to the
Option, shall again become available for grant under the terms of the Plan.
The total amount of the Common Stock with respect to which Options and
Other Rights may be granted to any single employee under the Plan shall not
exceed in the aggregate 250,000 shares.
The Company intends that the Plan shall apply to "common stock"
proposed to be issued as a result of the Company's recapitalization in
connection with an offering of "common stock" proposed to be registered under
the Securities Act of 1933, as amended (the "Securities Act"), and intends that
the provisions of Section 11 of the Plan shall be construed so as to achieve
this result.
4. ELIGIBILITY
The individuals who shall be eligible for grant of Options and Other
Rights under the Plan shall be key employees, directors and other individuals
who render services of special importance to the management, operation, or
development of the Company or a Subsidiary, and who have contributed or may be
expected to contribute materially to the success of the Company or a Subsidiary.
Incentive stock options ("ISOs") shall not be granted to any individual who is
not an
<PAGE>
-3-
employee of the Company or a Subsidiary. The term "Optionee," as used in the
Plan, refers to any individual to whom an Option or Other Right has been
granted.
5. TERMS AND CONDITIONS OF OPTIONS
Every Option shall be evidenced by a written Stock Option Agreement in
such form as the Committee shall approve from time to time, specifying the
number of shares of Common Stock that may be purchased pursuant to the Option,
the time or times at which the Option shall become exercisable in whole or in
part, whether the Option is intended to be an ISO or a non-qualified stock
option ("NSO"), and such other terms and conditions as the Committee shall
approve, and containing or incorporating by reference the following terms and
conditions:
(a) Duration. The duration of each Option shall be as
specified by the Committee in its discretion; provided, however, that
no ISO shall expire later than ten (10) years from its date of grant,
and no ISO granted to an employee who owns (directly or under the
attribution rules of Section 424(d) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any Subsidiary shall expire later
than five (5) years from its date of grant.
(b) Exercise Price. The exercise price of each Option shall be
any lawful consideration, as specified by the Committee in its
discretion; provided, however, that the price with respect to an ISO
shall be at least one hundred percent (100%) of the fair market value
of the shares on the date on which the Committee awards the Option,
which shall be considered the date of grant of the Option for purposes
of fixing the price; and provided further that the price with respect
to an ISO granted to an employee who at the time of grant owns
(directly or under the attribution rules of Section 424(d) of the Code)
stock representing more than ten percent (10%) of the voting power of
all classes of stock of the Company or of any Subsidiary shall be at
least one hundred ten percent (110%) of the fair market value of the
shares on the date of grant of the ISO. For purposes of the Plan,
except as may be otherwise explicitly provided in the Plan or in any
Stock Option Agreement, Restricted Stock Agreement, SAR Agreement or
similar document, the "fair market value" of a share of Common Stock at
any particular date shall be determined according to the following
rules: (i) if the Common Stock is not at the time listed or admitted to
trading on a stock exchange or the Nasdaq National Market, the fair
market value shall be the closing price of the Common Stock on the date
in question in the over-the-counter market, as such price is reported
in a publication of general circulation selected by the Board and
regularly reporting the price of the Common Stock in such market;
provided, however, that if the price of the Common Stock is not so
reported, the fair market value shall be determined in good faith by
the Board, which may take into consideration (1) the price paid for the
Common Stock in the most recent trade of a substantial number of shares
known to the Board to have occurred at arm's length between willing and
knowledgeable investors, or (2) an appraisal by an independent party,
or (3) any other method of valuation undertaken in good faith by the
Board, or some or all of the above as the Board shall in its discretion
elect; or (ii) if the Common Stock is at the time listed or admitted to
trading on any stock exchange or the Nasdaq National Market, then the
fair market value shall be the mean between the lowest and highest
reported sale prices (or the lowest reported bid price and the highest
reported
<PAGE>
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asked price) of the Common Stock on the date in question on the
principal exchange on which the Common Stock is then listed or admitted
to trading. If no reported sale of Common Stock takes place on the date
in question on the principal exchange or the Nasdaq National Market, as
the case may be, then the reported closing sale price (or the reported
closing asked price) of the Common Stock on such date on the principal
exchange or the Nasdaq National Market, as the case may be, shall be
determinative of fair market value.
(c) Method of Exercise. To the extent that it has become
exercisable under the terms of the Stock Option Agreement, an Option
may be exercised from time to time by written notice to the Chief
Financial Officer of the Company or his designee stating the number of
shares with respect to which the Option is being exercised and
accompanied by payment of the exercise price in cash or check payable
to the Company, or, if the Stock Option Agreement so provides, other
payment or deemed payment described in this subsection 5(c). Such
notice shall be delivered in person or by facsimile transmission to the
Chief Financial Officer of the Company or his designee or shall be sent
by registered mail, return receipt requested, to the Chief Financial
Officer of the Company or his designee, in which case delivery shall be
deemed made on the date such notice is deposited in the mail.
Alternatively, payment of the exercise price may be made:
(1) In whole or in part, in shares of Common Stock
already owned by the Optionee or to be received upon exercise
of the Option, provided that such shares are fully vested and
free of all liens, claims, and encumbrances of any kind;
provided, further, that the Optionee may not make payment in
shares of Common Stock that he acquired upon the earlier
exercise of any ISO, unless he has held the shares until at
least two (2) years after the date the ISO was granted and at
least one (1) year after the date the ISO was exercised. If
payment is made in whole or in part in shares of Common Stock,
then the Optionee shall deliver to the Company certificates
registered in his name representing a number of shares of
Common Stock legally and beneficially owned by him, fully
vested and free of all liens, claims, and encumbrances of
every kind and having a fair market value on the date of
delivery that is not greater than the exercise price, such
certificates to be duly endorsed, or accompanied by stock
powers duly endorsed, by the record holder of the shares
represented by such certificates. If the exercise price
exceeds the fair market value of the shares for which
certificates are delivered, the Optionee shall also deliver
cash or a check payable to the order of the Company in an
amount equal to the amount of that excess, or, if the Stock
Option Agreement so provides, his promissory note as described
in the next following paragraph of this subsection 5(c); or
(2) In whole or in part by delivery of the Optionee's
recourse promissory note, in a form specified by the Company,
secured by the Common Stock acquired upon exercise of the
Option and such other security as the Committee may require.
Alternatively, Options may be exercised by means of a
"cashless exercise" procedure in which a broker: (i) transmits the
option price to the Company in cash or acceptable cash equivalents,
either (1) against the Optionee's notice of exercise and the Company's
confirmation that it will deliver to the broker stock certificates
issued in the name of the
<PAGE>
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broker for at least that number of shares having a fair market value
equal to the option price, or (2) as the proceeds of a margin loan to
the Optionee; or (ii) agrees to pay the option price to the Company in
cash or acceptable cash equivalents upon the broker's receipt from the
Company of stock certificates issued in the name of the broker for at
least that number of shares having a fair market value equal to the
option price.
At the time specified in an Optionee's notice of exercise, the
Company shall, without issue or transfer tax to the Optionee, deliver
to him at the main office of the Company, or such other place as shall
be mutually acceptable, a certificate for the shares as to which his
Option is exercised. If the Optionee fails to pay for or to accept
delivery of all or any part of the number of shares specified in his
notice upon tender of delivery thereof, his right to exercise the
Option with respect to those shares shall be terminated, unless the
Company otherwise agrees.
(d) Reload Options. The Committee may, in its discretion,
provide in the terms of any Stock Option Agreement that if the Optionee
delivers shares of Common Stock already owned or to be received upon
exercise of the Option in full or partial payment of the option price,
or in full or partial payment of the tax withholding obligations
incurred on account of the exercise of the Option, the Optionee shall,
either automatically and immediately upon such exercise, or in the
discretion of the Committee upon such exercise, be granted a new option
(a "Reload Option") to purchase that number of shares of Common Stock
delivered by the Optionee to the Company, on such terms and conditions
as the Committee may determine under the terms of the Plan. The
exercise price for shares subject to a Reload Option shall be not less
than one hundred percent (100%) of the fair market value of the shares
on the date of grant of the Reload Option, and the duration of a Reload
Option shall be equal to the unexpired term of the exercised Option on
the date of exercise.
(e) Notice of ISO Stock Disposition. The Optionee must notify
the Company promptly in the event that he sells, transfers, exchanges
or otherwise disposes of any shares of Common Stock issued upon
exercise of an ISO, before the later of (i) the second anniversary of
the date of grant of the ISO, and (ii) the first anniversary of the
date the shares were issued upon his exercise of the ISO.
(f) Effect of Cessation of Employment. The Committee shall
determine in its discretion and specify in each Stock Option Agreement
the effect, if any, of the termination of the Optionee's employment
upon the exercisability of the Option.
(g) No Rights as Stockholder. An Optionee shall have no rights
as a stockholder with respect to any shares covered by an Option until
the date of issuance of a certificate to him for the shares. No
adjustment shall be made for dividends or other rights for which the
record date is earlier than the date the certificate is issued, other
than as required or permitted pursuant to Section 11.
(h) Substituted Option. With the consent of the Optionee, the
Committee shall have the authority at any time and from time to time to
terminate any outstanding Option and grant in substitution for it a new
Option covering the same number or a different number of
<PAGE>
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shares, provided that the option price under the new Option shall be no
less than the fair market value of the Common Stock on the date of
grant of the new Option.
6. STOCK APPRECIATION RIGHTS
The Committee may grant SARs in respect of such number of shares of
Common Stock subject to the Plan as it shall determine, in its discretion, and
may grant SARs either separately or in connection with Options, as described in
the following sentence. An SAR granted in connection with an Option may be
exercised only to the extent of the surrender of the related Option, and to the
extent of the exercise of the related Option the SAR shall terminate. Shares of
Common Stock covered by an Option that terminates upon the exercise of a related
SAR shall cease to be available under the Plan. The terms and conditions of an
SAR related to an Option shall be contained in the Stock Option Agreement, and
the terms of an SAR not related to any Option shall be contained in an SAR
Agreement.
Upon exercise of an SAR, the Optionee shall be entitled to receive from
the Company an amount equal to the excess of the fair market value, on the
exercise date, of the number of shares of Common Stock as to which the SAR is
exercised, over the exercise price for those shares under a related Option, or
if there is no related Option, over the base value stated in the SAR Agreement.
The amount payable by the Company upon exercise of an SAR shall be paid in the
form of cash or other property (including Common Stock of the Company), as
provided in the Stock Option Agreement or SAR Agreement governing the SAR.
All grants of SARs to Insiders shall be capable of being settled only
for cash and may not be granted in connection with an Option. If an SAR is
awarded to a person who is not an Insider at the time of award but subsequently
becomes an Insider, it shall be deemed to be amended to provide that it may be
settled only in cash while such person is an Insider.
7. RESTRICTED STOCK
The Committee may grant or award shares of Restricted Stock in respect
of such number of shares of Common Stock, and subject to such terms or
conditions, as it shall determine and specify in a Restricted Stock Agreement.
A holder of Restricted Stock shall have all of the rights of a
stockholder of the Company, including the right to vote the shares and the right
to receive any cash dividends, unless the Committee shall otherwise determine.
Certificates representing Restricted Stock shall be imprinted with a legend to
the effect that the shares represented may not be sold, exchanged, transferred,
pledged, hypothecated or otherwise disposed of except in accordance with the
terms of the Restricted Stock Agreement, and, if the Committee so determines,
the Optionee may be required to deposit the certificates with an escrow agent
designated by the Committee, together with a stock power or other instrument of
transfer appropriately endorsed in blank.
<PAGE>
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8. SPECIAL BONUS GRANTS AND LOANS
In its discretion, the Committee may grant in connection with any NSO
or grant of Restricted Stock a special cash bonus in an amount not to exceed the
lesser of (i) the combined federal, state and local income tax liability
incurred by the Optionee as a consequence of his acquisition of stock pursuant
to the exercise of the NSO or the grant or vesting of the Restricted Stock, and
the related special bonus, or (ii) thirty percent (30%) of the imputed income
realized by the Optionee on account of such exercise or vesting and the related
special bonus. The Committee may, in its discretion, estimate the amount of the
tax liability described in clause (i) of the immediately preceding sentence,
using formulae or methods uniformly applied to Optionees in similar
circumstances, without regard to the particular circumstances of an individual
Optionee. A special bonus shall be payable solely to federal, state, and local
taxing authorities for the benefit of the Optionee at such time or times as
withholding payments of income tax may be required. A special bonus may be
granted simultaneously with a related NSO or Restricted Stock grant or
separately with respect to an outstanding NSO or Restricted Stock granted at an
earlier date. In the event that an NSO with respect to which a special bonus has
been granted becomes exercisable by the personal representative of the estate of
the Optionee, or that Restricted Stock with respect to which a special bonus has
been granted shall vest after the death of an Optionee, the bonus shall be
payable to or for the benefit of the estate in the same manner and to the same
extent as it would have been payable for the benefit of the Optionee had he
survived to the date of exercise or vesting.
In the Committee's discretion, a Stock Option Agreement or Restricted
Stock Agreement may provide that to the extent that an Optionee does not receive
a special bonus of the maximum amount permissible under this Section 8, the
Company shall lend the Optionee an amount no greater than the excess of such
maximum over the special bonus (if any) paid to the Optionee, for such term and
at such rate of interest (or no interest) and on such further terms and
conditions as the Committee determines.
9. OPTIONS AND OTHER RIGHTS VOIDABLE
If an individual to whom a grant has been made fails to execute and
deliver to the Committee a Stock Option Agreement, SAR Agreement or Restricted
Stock Agreement within thirty (30) days after it is submitted to him, the Option
or Other Rights granted under the agreement shall be voidable by the Company at
its election, without further notice to the Optionee.
10. REQUIREMENTS OF LAW
The Company shall not be required to transfer any Restricted Stock or
to sell or issue any shares upon the exercise of any Option or SAR if the
issuance of such shares will result in a violation by the Optionee or the
Company of any provisions of any law, statute or regulation of any governmental
authority. Specifically, in connection with the Securities Act, upon the
transfer of Restricted Stock or the exercise of any Option or SAR the Company
shall not be required to issue shares unless the Board has received evidence
satisfactory to it to the effect that the holder of the Option or Other Right
will not transfer such shares except pursuant to a registration statement in
effect under the Securities Act or unless an opinion of counsel satisfactory to
the Company has been received by the Company to the effect that such
registration is not required. Any determination in
<PAGE>
-8-
this connection by the Board shall be conclusive. The Company shall not be
obligated to take any other affirmative action in order to cause the transfer of
Restricted Stock or the exercise of an Option or SAR to comply with any law or
regulations of any governmental authority, including, without limitation, the
Securities Act or applicable state securities laws.
11. CHANGES IN CAPITAL STRUCTURE
In the event that the outstanding shares of Common Stock are hereafter
changed for a different number or kind of shares or other securities of the
Company, by reason of a reorganization, recapitalization, exchange of shares,
stock split, combination of shares or dividend payable in shares or other
securities, a corresponding adjustment shall be made by the Committee in the
number and kind of shares or other securities covered by outstanding Options and
Other Rights, and for which Options or Other Rights may be granted under the
Plan. Any such adjustment in outstanding Options or Other Rights shall be made
without change in the total price applicable to the unexercised portion of the
Option, but the price per share specified in each Stock Option Agreement or
agreement as to Other Rights shall be correspondingly adjusted; provided,
however, that no adjustment shall be made with respect to an ISO that would
constitute a modification as defined in Section 424 of the Code. Any such
adjustment made by the Committee shall be conclusive and binding upon all
affected persons, including the Company and all Optionees.
If while unexercised Options or SARs remain outstanding under the Plan
the Company merges or consolidates with a wholly-owned subsidiary for the
purpose of reincorporating itself under the laws of another jurisdiction, the
Optionees will be entitled to acquire shares of Common Stock of the
reincorporated Company upon the same terms and conditions as were in effect
immediately prior to such reincorporation (unless such reincorporation involves
a change in the number of shares or the capitalization of the Company, in which
case proportional adjustments shall be made as provided above) and the Plan,
unless otherwise rescinded by the Board, will remain the Plan of the
reincorporated Company.
Except as otherwise provided in the preceding paragraph, if while
unexercised Options or SARs remain outstanding under the Plan the Company merges
or consolidates with one or more corporations (whether or not the Company is the
surviving corporation), or is liquidated or sells or otherwise disposes of
substantially all of its assets to another entity, or upon a Change of Control
(as defined herein), then, except as otherwise specifically provided to the
contrary in an Optionee's Stock Option Agreement, SAR Agreement or Restricted
Stock Agreement, the Committee, in its discretion, shall amend the terms of all
outstanding Options and SARs so that either:
(i) after the effective date of such merger, consolidation,
sale or Change of Control, as the case may be, each Optionee
shall be entitled, upon exercise of an Option or SAR, to
receive in lieu of shares of Common Stock the number and class
of shares of such stock or other securities to which he would
have been entitled pursuant to the terms of the merger,
consolidation, sale or Change of Control if he had been the
holder of record of the number of shares of Common Stock as to
which the Option or SAR is being exercised, or shall be
entitled to receive from the successor entity a new stock
option or stock appreciation right of comparable value; or
<PAGE>
-9-
(ii) all outstanding Options and SARs shall be cancelled as of
the effective date of any such merger, consolidation,
liquidation, sale or Change of Control, provided that each
Optionee shall have the right to exercise his Option or SAR
according to its terms during the period of twenty (20) days
ending on the day preceding the effective date of such merger,
consolidation, liquidation, sale or Change of Control; and in
addition to the foregoing, the Committee may in its discretion
amend the terms of an Option or SAR by cancelling some or all
of the restrictions on its exercise, to permit its exercise
pursuant to this paragraph (ii) to a greater extent than that
permitted on its existing terms; or
(iii) all outstanding Options and SARs shall be cancelled as
of the effective date of any such merger, consolidation,
liquidation, sale or Change of Control in exchange for
consideration in cash or in kind, which consideration in both
cases shall be equal in value to the value of those shares of
stock or other securities the Optionee would have received had
the Option been exercised (to the extent then exercisable) and
no disposition of the shares acquired upon such exercise had
been made prior to such merger, consolidation, liquidation,
sale or Change in Control, less the option price therefor.
Upon receipt of such consideration by the Optionee, his or her
Option shall immediately terminate and be of no further force
and effect. The value of the stock or other securities the
Optionee would have received if the Option had been exercised
shall be determined in good faith by the Committee, and in the
case of shares of the Common Stock of the Company, in
accordance with the provisions of Section 5(b).
A "Change of Control" of the Company shall be deemed to have occurred
if any person (as such term is used in Section 13(d) and 14(d)(2) of the
Exchange Act) other than a trust related to an employee benefit plan maintained
by the Company becomes the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of fifty percent (50%) or more of the Company's
outstanding Common Stock, and within the period of twenty-four (24) consecutive
months immediately thereafter, individuals other than (a) individuals who at the
beginning of such period constitute the entire Board of Directors or (b)
individuals whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the period, become a
majority of the Board of Directors.
Except as expressly provided to the contrary in this Section 11, the
issuance by the Company of shares of stock of any class for cash or property or
for services, either upon direct sale or upon the exercise of rights or
warrants, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect the number, class or
price of shares of Common Stock then subject to outstanding Options or SARs.
12. FORFEITURE FOR DISHONESTY
Notwithstanding anything to the contrary in the Plan, if the Board
determines, after full consideration of the facts presented on behalf of both
the Company and an Optionee, that the Optionee has been engaged in fraud,
embezzlement, theft, commission of a felony or proven
<PAGE>
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dishonesty in the course of his employment by the Company or a Subsidiary, which
damaged the Company or Subsidiary, or has disclosed trade secrets or other
proprietary information of the Company or a Subsidiary, (a) the Optionee shall
forfeit all unexercised Options and all exercised Options under which the
Company has not yet delivered the certificates, and (b) the Company shall have
the right to repurchase all or any part of the shares of Common Stock acquired
by the Optionee upon the earlier exercise of any Option, at a price equal to the
amount paid to the Company upon such exercise, increased by an amount equal to
the interest that would have accrued in the period between the date of exercise
of the Option and the date of such repurchase upon a debt in the amount of the
exercise price, at the prime rate(s) announced from time to time during such
period in the Federal Reserve Statistical Release Selected Interest Rates. The
decision of the Board as to the cause of an Optionee's discharge and the damage
done to the Company or a Subsidiary shall be final, binding, and conclusive. No
decision of the Board, however, shall affect in any manner the finality of the
discharge of an Optionee by the Company or a Subsidiary.
13. MISCELLANEOUS
(a) Nonassignability of Other Rights. No Other Rights shall be
assignable or transferable by the Optionee except by will or the laws of descent
and distribution. During the life of the Optionee, Other Rights shall be
exercisable only by the Optionee.
(b) No Guarantee of Employment. Neither the Plan nor any Stock Option
Agreement, SAR Agreement or Restricted Stock Agreement shall give an employee
the right to continue in the employment of the Company or a Subsidiary, or give
the Company or a Subsidiary the right to require an employee to continue in
employment.
(c) Tax Withholding. To the extent required by law, the Company shall
withhold or cause to be withheld income and other taxes with respect to any
income recognized by an Optionee by reason of the exercise or vesting of an
Option or Other Right, or a cash bonus paid in connection with such exercise or
vesting, and as a condition to the receipt of any Option or Other Right or
related cash bonus the Optionee shall agree that if the amount payable to him by
the Company and any Subsidiary in the ordinary course is insufficient to pay
such taxes, then he shall upon the request of the Company pay to the Company an
amount sufficient to satisfy its tax withholding obligations.
Without limiting the foregoing, the Committee may in its discretion
permit any Optionee's withholding obligation to be paid in whole or in part in
the form of shares of Common Stock, by withholding from the shares to be issued
or by accepting delivery from the Optionee of shares already owned by him. The
fair market value of the shares for such purposes shall be determined as set
forth in Section 5(b). An Optionee may not make any such payment in the form of
shares of Common Stock acquired upon the exercise of an ISO until the shares
have been held by him for at least two (2) years after the date the ISO was
granted and at least one (1) year after the date the ISO was exercised. If
payment of withholding taxes is made in whole or in part in shares of Common
Stock, the Optionee shall deliver to the Company certificates registered in his
name representing shares of Common Stock legally and beneficially owned by him,
fully vested and free of all liens, claims, and encumbrances of every kind, duly
endorsed or accompanied by stock powers duly endorsed by the record holder of
the shares represented by such certificates. If the Optionee is
<PAGE>
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subject to Section 16(a) of the Exchange Act, his ability to pay his withholding
obligation in the form of shares of Common Stock shall be subject to such
additional restrictions as may be necessary to avoid any transaction that might
give rise to liability under Section 16(b) of the Exchange Act.
(d) Use of Proceeds. The proceeds from the sale of shares pursuant to
Options or Other Rights shall constitute general funds of the Company.
14. EFFECTIVE DATE, DURATION, AMENDMENT AND
TERMINATION OF PLAN
The Plan shall be effective as of November 30, 1995, subject to
ratification by (a) the holders of a majority of the outstanding shares of
capital stock present, or represented, and entitled to vote thereon (voting as a
single class) at a duly held meeting of the shareholders of the Company, or (b)
by the written consent of the holders of a majority (or such greater degree as
may be prescribed under the Company's charter, by-laws, and applicable state
law) of the capital stock of the issuer entitled to vote thereon (voting as a
single class) within twelve (12) months after such date. Options that are
conditioned upon such ratification of the Plan by the shareholders may be
granted prior to such ratification. The Committee may grant Options and Other
Rights under the Plan from time to time until the close of business on November
26, 2005. The Board may at any time amend the Plan, provided, however, that
without approval of the Company's stockholders there shall be no: (i) increase
in the total number of shares covered by the Plan, except by operation of the
provisions of Section 11, or the aggregate number of shares of Common Stock
which may be issued to any single employee; (ii) change in the class of
individuals eligible to receive Options or Other Rights; (iii) reduction in the
exercise price of any ISO; (iv) extension of the latest date upon which any ISO
may be exercised; (v) material increase of the obligations of the Company or
rights of any Optionee under the Plan or any Option or Other Rights granted
pursuant to the Plan; or (vi) other change in the Plan that requires stockholder
approval under applicable law. No amendment shall adversely affect outstanding
Options or Other Rights without the consent of the Optionee. The Plan may be
terminated at any time by action of the Board, but any such termination will not
terminate Options and Other Rights then outstanding, without the consent of the
Optionee.
